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Distribution Decisions in MikesBikes Advanced

The Distribution screen enables you to set a Retail Margin and provide Extra Support for each of the three distribution channels; Bike Shops, Sports Stores and Department Stores.

Retail Margin is the percentage of the retail price retained by distributors. A bicycle sold for $1,800 with a retail margin percentage of 45% means the distributor earns $810 on the sale and you as the manufacturer has a wholesale price of $990.

Maintaining retail margins at the initial percentages will encourage distributors to sell your bikes, however you earn less on each sale. Ideally you will be able to generate consumer demand for your products, enabling you to decrease retail margins and increase your company’s wholesale revenue. Be careful as margins that are too low can result in stores stocking your competitor’s bikes over yours.

Extra Support provides additional return to your distributors. These take the form of product training, special promotions, point of sale displays, and extra sales staff training on your products.

Distribution Channels

Vendors of bikes can be broken into three categories: Bike Shops, Sports Stores and
Department. A brief description of each channel is given below.

Bike Shops

The bike shop is a specialty store dedicated to bicycles and bike-related products. Store assistants are trained bike specialists. People unsure of which bike to buy will usually go to a bike shop as staff tend to be enthusiasts themselves. Bike shops generally stock more bikes in the mid to high price range and require a higher retail margin.

Sports Stores

Sports stores stock a wide range of sporting equipment including bikes. The staff at these stores are not as knowledgeable on technical aspects of each bike but can match a customer to the bike that meets their needs. Consumers who buy from these stores generally know what they are looking for in a bike but not particularly a specific brand. As such, may be more inclined to choose a competitor’s bike if it is in stock and/or at a cheaper price.

Department Stores

Department stores (chain retailers) stock a wide range of products across all
consumer goods, from refrigerators and televisions to apparel and kitchenware.
Their staff are not as informed about specific products or the bicycle industry, but
they have the largest customer base. They typically stock low to mid-priced bikes,
sell in high quantities and so generally require less retail margin. Customers often do
not have a definite product in mind, so will purchase based on the bike with the best
in-store appeal.

Consumer Shopping Habits

The table below shows the proportion of customers who purchase through each distribution channel:

Retail ChannelBike ShopsSports StoresDepartment Stores

Distribution Performance

Distributors want to stock products that provide them with a high level of return. They receive this return through a combination of total sales revenue, retail margins and extra support. The effectiveness of your distribution strategy is represented by a Distribution rating.

The Market Summary report displays your company Distribution rating where you can compare this to your competitor’s rating.

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